MPs' gold-plated pensions will cost taxpayers millions more

Taxpayers will have to pay millions more towards MPs' gold-plated pension scheme, it has emerged.

By James Kirkup, Political Correspondent

5:21PM BST 31 Mar 2009

The Treasury will pump more money into the scheme – which some experts regard as the most generous in the country – even as many private sector workers see the value of their pensions plummet.

In a report published on Tuesday, the Government Actuary said that there is a £50.9 shortfall in the pension scheme, and said the Treasury must increase its payments into the fund over the next 15 years as a result.

Gordon Brown has called for curbs on the parliamentary pension scheme and promised to limit taxpayers' contributions.

The Government has said that the Exchequer contribution to the pension will be capped at 20 per cent of the £46.1 million Commons wage bill.

But on top of that, the Government is now paying money equal to another 8.7 per cent of the payroll - £4 million a year - to close the shortfall.

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In all, taxpayers will now pay £13.2 million a year to the parliamentary scheme, up from £12.4 million.

To prevent the public's contributions rising even higher, the Government has proposed that MPs themselves would pay another £15 a week to the retirement scheme.

If that change is approved by MPs, their total annual contributions will be £5.5 million a year.

Recent changes have made the parliamentary scheme even more generous.

In 2002, MPs voted to increase their pension accrual rate to one fortieth of salary for every year worked. Advocates of the change argued that the change was justified because parliamentary careers are shorter than most workers.'

By contrast, even those private sector workers lucky enough to retain a final salary pension only accrue benefits at a rate of around one-sixtieth a year.

The result is that after 20 just years' service, an MP can retire with annual pension of half their £65,000 salary.

A worker in the private sector with a defined-contribution pension could have to build a pension pot worth more than £500,000 to enjoy a similar retirement.

Some estimates say the average private sector pension pot is worth around £25,000

Steve Webb, the Liberal Democrat pensions spokesman, said increasing public contributions to MPs pensions would only add to public anger over parliamentary allowances and perks.

"The pensions of MPs and other well-paid public sector workers have to be brought in line with reality," he said.

"With members of the public losing their jobs and seeing their pensions plummet, MPs cannot insulate themselves from the harsh realities of the recession."

Matthew Elliott, Chief Executive of the TaxPayers' Alliance, said: "It is deeply unfair that MPs' pensions are so costly for taxpayers, whilst most ordinary people can't even afford pensions for themselves.

"The Parliamentary pension scheme is simply unaffordable, and if MPs want to balance the books they should either pay more themselves or move onto a more affordable scheme. There is no way taxpayers should have to pick up this bill."

Harriet Harman, the Commons leader, announced the changes in the scheme and insisted they were fair.

She said: "The Government is committed to providing public service pension schemes that are affordable and sustainable in the long-term, consistent with the principle of fairness for all taxpayers."